Editor's note: Jon D. Markman writes a weekly column for CNBC on MSN Money that is republished here on TheStreet.com . He's also a regular contributor to RealMoney , TheStreet.com's subscription site. If you'd like to see all of Jon Markman's RealMoney commentary, click here for information about a free trial.


Stock market got you down? Are all of those can't-miss financial stocks, consumer product stocks and technology stocks in your portfolio missing in action? Is your broker droning on about how he can't make you any money in this "low-volatility environment," whatever that is, and maybe you'd be interested in some municipal bonds or a certificate of deposit paying 2%? Brother, can you spare an annuity?

Well then, if you have the stomach for it, it's time to step into the casino. Throw away your cares about fiscal responsibility and enter the world of stock speculation circa 1999. This is a world where volatility is in the house, where momentum is not just another eight-letter word.

Yes, let's turn to our annual end-of-October list of the stocks that have blown away the competition this year with gains of 100% or more.

Stocks for the Stretch Drive

Longtime readers will recall that these stocks often do really well into year-end, then fall apart in the next calendar year. They do well in the stretch drive of the fourth quarter, apparently, because all of the portfolio managers who have scoffed at their gains all year finally wake up and smell the alpha. These babies are improvised explosive devices with lit fuses, and after the recent unpleasantness in the broader market, many appear ready to blow the pockets off short-sellers' khakis.

The primary criteria for this list are that the companies must have market capitalizations greater than $50 million, prices above $2 and trading volume of more than 25,000 shares a day. Last year, that would have netted us hundreds of companies. This year, there are only 100.

To make sure that we are looking at stocks that are still in uptrends and aren't round-tripping from being up 300% to flat, I have added criteria that the stocks must have been up in the past three months and the current price must be above its average price of the past 10 weeks and 50 weeks. That gets us down to 82 incredible names. The following table lists the top 15 through Oct. 24.

Markman's Big Gainers List for 2004
These companies have little in common except huge upside moves this year
Company Industry Market Cap % Rise YTD Oct. 25 Price StockScouter Ranking
Travelzoo (TZOO:Nasdaq) Internet $960 million 559.2% $65.14 3
Air T (AIRT:Nasdaq) Air delivery 75 million 452.0 27.73 1
Cenuco (ICU:NYSE) Education services 71 million 445.5 6.00 4
W.R. Grace (GRA:NYSE) Chemicals 772 million 361.9 11.62 4
QSound Labs (QSND:Nasdaq) Electronics 53 million 342.8 6.92 3
Terra Nitrogen (TNH:NYSE) Chemicals 400 million 333.5 21.38 4
Jupitermedia (JUPM:Nasdaq) Internet 627 million 322.6 20.31 5
Novatel Wireless (NVTL:Nasdaq) Business services 583 million 305.7 24.57 5
Riviera Holdings (RIV:NYSE) Casinos 72 million 288.2 21.00 5
Viewpoint (VWPT:Nasdaq) Multimedia software 162 million 280.0 3.07 3
Kmart Holding (KMRT:Nasdaq) Discount stores 8.1 billion 273.2 90.28 6
Isonics (ISON:Nasdaq) Chemicals 76 million 270.1 3.65 3
Elan (ELN:NYSE ADR) Drug delivery 9.7 billion 267.5 24.92 3
Vaalco Energy (VEIX:Nasdaq) Indep. oil & gas 156 million 263.6 5.04 5
NitroMed (NTMD:Nasdaq) Drug manufacturers 577 million 206.0 23.65 3
Source: MSN Money

So what binds these names together? At first glance, absolutely nothing. The businesses are all over the place, from Internet travel services to casinos, energy and drugs. They are mostly very small companies, but there are a couple of large companies thrown in, too.

The cement that glues these ideas into a single concept is that they have all been appointed as appropriate trading vehicles by speculators. And that's just about all you need to know.

As one of my mentors once pointed out, don't confuse the economy with the market, and don't confuse investing with speculating. All are separate beasts, and they require that you use different sets of judgment.

This Place Is a Real Zoo

Let's consider Travelzoo ( TZOO). All this company does is provide a place for travel companies to advertise low fares. It isn't a travel brokerage like Orbitz ( ORBZ).

To be sure, Travelzoo's reported revenue and earnings are high and rising. But at the current price, that amounts to an astronomical price-to-sales multiple of 31.2 and a price-to-earnings multiple of 212. Compare that to industry averages of 0.8 and 33, respectively.

Yet that doesn't stop stock speculators from using it as a plaything. Every time Travelzoo has hit its rising 50-day moving average in the past year, it has bounced like an Olympic gymnast.

It's at that point again now. Purely from a subjective chart-reading point of view, it looks a lot now like it did back in August before its latest 100% advance.

The second stock on the list, Air T ( AIRT), operates in the red-hot air-cargo services space out of its home base in North Carolina. I wrote about larger companies in this space last week. They are some of the leaders of the Dow Jones Transportation Average, companies like Expeditors International ( EXPD). Speculators are always looking for small-cap, low-float ways to exploit larger themes, and Air T is their toy.

The company's earnings and revenue growth have supported the move, and its price-to-sales and P/E multiples look fine on the surface at 1.25 and 40. Dig a little deeper, however, and you'll see that, historically, this company has sold for multiples of around 0.5 and around 10, respectively. The chart is rounding into shape at the moment, but from a risk management perspective, it would be a lot better if it either consolidated for another month or dropped 12 points.

W.R. Grace ( GRA) is virtually a pure play on expectations that Congress will pass rules in the next session that relieve large industrial companies from much of their responsibilities to asbestos victims. The stock looks pretty cheap right now, has the momentum, and, if you have the stomach for volatility, strength of character to buy on dips, or positive insight into the congressional bill-making process, it should be good to go for the rest of the year.

Jupitermedia ( JUPM) is one of the last of the old-time Internet marketing companies that derives its revenue from providing images, research and events to information technology professionals. It is actually covered by three analysts, and its forward P/E multiple of 46 isn't out of line with its projected growth of 36%. It is certainly expensive -- its price-to-sales multiple is 9.8 -- but as a speculative instrument, it is not way out of line. The chart is constructive for further advance through the end of the year.

The StockScouter Winners

Now what about the best-returning stocks with high ratings from MSN Money's StockScouter rating systems? Here are the top 10 for the year.

StockScouter's Favorite Big Gainers for 2004
These stocks seem less speculative than those in the prior table
Company Industry Market Cap % Rise YTD Oct. 25 Price StockScouter ranking
Research In Motion (RIMM:Nasdaq) Commercial services $15 billion 157.0% $84.47 10
Chicago Mercantile Exchange (CME:NYSE) Business services 5 billion 132.3 169.35 10
General Maritime (GMR:NYSE) Shipping 1.4 billion 116.7 37.85 10
Tesoro Petroleum (TSO:NYSE) Oil & gas refining 2.1 billion 111.1 30.45 10
Tsakos Energy Navigation (TNP:NYSE) Shipping 762 million 107.2 38.00 10
Ultra Petroleum (UPL:NYSE) Independent oil & gas 3.7 billion 103.4 49.56 10
Autodesk (ADSK:Nasdaq) System software 5.7 billion 102.6 49.86 10
OMI (OMM:NYSE) Shipping 1.7 billion 101.7 18.08 10
First Marblehead (FMD:NYSE) Credit services 3.1 billion 138.6 49.66 9
Delta Petroleum (DPTR:Nasdaq) Independent oil & gas 565 million 133.1 14.15 9
Source: MSN Money

These should catch a nice bid through the rest of the year, as they have constituencies among both speculative and fundamental players. It's interesting to note that several of these stocks -- Chicago Mercantile Exchange ( CME), Tesoro Petroleum ( TSO), Tsakos Energy ( TNP), Ultra Petroleum ( UPL), Autodesk ( ADSK) and OMI ( OMM) to be exact -- have been on my StockScouter lists all year.

I will track both lists and report back in my year-end wrap-up.


Please note that due to factors including low market capitalization and/or insufficient public float, we consider Air T, Cenuco, QSound Labs, Terra Nitrogen, Riviera Holdings, Viewpoint, Isonics and Vaalco Energy to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

Jon D. Markman is publisher of StockTactics Advisor, an independent weekly investment newsletter, as well as senior strategist and portfolio manager at Pinnacle Investment Advisors. At the time of publication, he held positions in the following stocks mentioned: Ultra Petroleum. While he cannot provide personalized investment advice or recommendations, he welcomes column critiques and comments at jon.markman@gmail.com; please write COMMENT in the subject line.

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